Pera Ng Taumbayan

7/30/2019 Pera Ng Taumbayan

1/46

P E R A N G T A U M B A Y A N , P A R A S A T A U M B A Y A N : E n h a nc i ng C i t i z e n P a rt i ci p a t io n i n P u b l i c F i na n c e 1


2/46

2 P E R A N G T A U M B A Y A N , P A R A S A T A U M B A Y A N : E n h a nc i ng C i t i z e n P a rt i ci p a ti o n i n P u b l i c F in a n c e


3/46


By: Prof. Leonor Magtolis Briones (Ret.)**

National College of Public Administration and Governance

University of the Philippines

and

Lead Convenor, Social Watch Philippines

PERA NG TAUMBAYAN,PARA SA TAUMBAYAN:

Enhancing Citizen Participationin Public Finance

**The author acknowledges the invaluable assistance of Prof. Alvic Padilla in the design and implementation of the

Focused Group Discussions for civil society organizations and public finance agencies. The author further

acknowledges the indispensable research and administrative assistance of Ms. Ligaya P. Castor and Mr. Nonnie

Gicana Jeruta.

2011


4/46



5/46


About the Author

Studying and teaching public finance. The author has been

studying, doing research and teaching public finance for more than

fifty years. She has seen the shift from nearly zero citizensparticipation to active involvement in certain phases of the public

finance cycle like budgeting and accountability. She has taught

students who have become committed bureaucrats, legislators and

policymakers.

Practicing public finance. The author is former Secretary to the

Commission on Audit, Vice-President for Finance and

Administration of the University of the Philippines, and Treasurer

of the Philippines. She therefore had the opportunity to actually

practice specific aspects of public finance. At the same time, shewas able to link up with the different public finance agencies and

acquire familiarity with their operations.

Advocating for public finance. The author has been part of civil

society networks and peoples organizations for more than forty

years. Her advocacy on debt and debt management as president

of Freedom from Debt Coalition, and increased social spending

for the Millennium Development Goals (MDGs), as Lead Convenor

of Social Watch Philippines, are a matter of public record.

Advocating for participation of indigenous peoples and Muslims

in public finance. Indigenous peoples and Muslims have not been

given the opportunity to participate in and contribute to decisions

on public finance. As an adopted member of the Bagobo Tribe

(Bae Utalan Clan) and Social Watch Convenor, the author is involved

in efforts to bring them into public finance advocacy at the local

and national levels.


6/46


Table of Contents

PART I: INTRODUCTION, METHODOLOGY, CONCEPTS 8Introduction 8

Methodology 9Some Concepts 10

Citizens participation, public finance and democracy 11

Some questions 12

PART II: THE PUBLIC FINANCE CYCLE 13Formulation of fiscal policy 13

Taxation and other revenue 14

Budgeting and expenditures 16

Borrowing and debt management 17

Accountability 18Citizens participation and public finance 18

PART III: THE STATE OF CITIZENS PARTICIPATION

IN PUBLIC FINANCE 19

THE FOCUSED GROUP DISCUSSIONS 20

Highlights of the FGDs 23

CITIZENS PARTICIPATION IN FISCAL POLICY FORMULATION 25

The MTPDP, Fiscal Policy, and the National Budget 25

Why citizens groups are silent on fiscal policy 27

CITIZENS PARTICIPATION IN TAXATION AND REVENUE ADMINISTRATION 28

The debate on direct and indirect taxes 28

Inadequacy of mechanisms to strengthen citizens 30

participation in taxation and revenue administration.

Graft and corruption in taxation and revenue administration 30

Unity on sin taxes among CSOs and government institutions 30

CITIZENS PARTICIPATION IN EXPENDITURE POLICY AND BUDGETING 31

The budget process 31

CITIZENS PARTICIPATION IN DEBT AND DEBT MANAGEMENT 34


7/46


CITIZENS PARTICIPATION IN ACCOUNTABILITY 36

DOES CITIZENS PARTICIPATION WORK IN LGU FINANCE? 37

LGUs and the public finance cycle 37

LGUs and the Millennium Development Goals 38

Does citizens participation work in local finance? 38

TOOLS FOR CITIZENS PARTICIPATION IN PUBLIC FINANCE 40

CAN INDIGENOUS PEOPLES AND MUSLIMS PARTICIPATE IN PUBLIC FINANCE? 41

Empowering IP groups through participation in the budget process 42

MDGs and the Bangsamoro 43

CHALLENGES 44

CLOSING STATEMENT 46

Table 1. Summary of Revenues by Source, 2007-2010 29

Table 1a. Tax Revenue Program, 2007-2010 29

Table 2. NG Outstanding Debt, As of May 2010 34

List of Tables


8/46


PART 1PART 1

Introduction

This study was initiated, supported and funded by the United

Nations Development Programme at the initiative of the

Governance Unit headed by Dr. Emmanuel E. Buendia.

In the Philippines, citizens participation in national affairs has been

accelerating and gaining ground since the decades of the eighties.

However, participation in public finance is a recent development.

Issues about revenues including taxes, expenditures, and

borrowing are considered the turf of policymakers, legislators,

academics and specialists. Policies on revenues and taxes,

expenditures and borrowing were formulated by the Executive,

made into laws by the Legislative Branch and implemented once

more by the Executive. The citizen merely paid the bill.

During the past five years however, there has been an increasing

demand for, and interest in citizens participation in public finance.

This paper is a timely response to this development.

Objectives of the study

1. The primary objective of the study is to conduct a

comprehensive review and assessment of citizens

participation in public finance;2. Propose recommendations to enhance and further

institutionalize citizens participation which can be the basis

for future UNDP programmes.

Introduction,Methodology,

Concepts


9/46


The methodology for this study is fairly straightforward and simple

and includes standard methods of research.

Desk and Library research. The typical first step in any research

involves a review of available literature on the topic. Since citizens

participation in public finance is fairly recent relative to other areas

of governance, publications on the topic are not as numerous as

in corruption, human rights, and so on.

Conduct of key informant interviews. This included interviews not

only of leading experts in the field but also members of civil society

groups and peoples organizations, as well as academics, students

and ordinary citizens who have been active in advocating

participation in public finance.

Focus Group Discussions. FGDs were conducted for two groups ofparticipants: one group was composed of government officials

involved in public finance and another group came from the civil

society sector.

A lifetime of studying, teaching, practicing and advocating for

public finance

The study extensively utilizes experiences, perspectives and

learnings accumulated in studying, teaching, practicing and

advocating for public finance for the past fifty years. This lifetimeinvolvement provides the lens for assessing the state of citizen

participation in decisions regarding the collection, expenditure and

borrowing of public financial resources.

Methodology


10/46


Some Concepts

Public Finance. There are many definitions of public finance, ranging from the shortest to the

longest, and from the simplest to the most complex. My favorite is perhaps the simplest andthe easiest to understand. It refers to the inflow of financial resources to the government and

the outflow of such resources from the government, for the attainment of public objectives.

In the specific case of developing countries, these objectives are often referred to as

development goals.

Public fiscal administration.This is a major field in Public Administration. It refers to the

formulation and implementation of policies related to the inflow of financial resourcestax,

non-tax revenue, other income, and proceeds from borrowingand the outflow of financial

resources through the implementation of the national budget. Public fiscal administration

also includes public financial accountability, with the Commission on Audit as the lead institution.

All of the above activities take place within the framework of the law, as well as existing

procedures, processes, rules and regulations.

Citizens participation. The study draws heavily from concepts elaborated by Dr. Emmanuel E.

Buendias doctoral dissertation, Democratizing Governance in the Philippines: Redefining and

Measuring the State of Peoples Participation in Governance. The dissertation was published

as a book with the same title in 2005 by the Center for Leadership, Citizenship and Democracy

(CLCD) of the National College of Public Administration and Governance, University of the

Philippines.

After a review of the literature of that time, Buendia redefined peoples participation in

governance as the expression of citizenship and the collective exercise of power of the organized

disadvantaged sectors to advance the peoples interests for the greater public good, which is

pursued within and beyond the confines of the public arena in a given social context. (Buendia:

2005, p.101).

The Buendia definition focuses on the organized disadvantaged sectors. Thus, the term peoples

participation. For purposes of this study on citizens participation, Buendias definition is

expanded to include all citizens. Thus, citizens participation includes the organized

disadvantaged sectors (peoples organizations or basic sectors) as well as organized non-

government organizations sometimes referred to as civil society organizations, professional

groups, academic institutions, and church and civic organizations.


11/46


Citizens participation, public finance and democracy

It is obvious that citizens participation is an essential feature of democracy and the democratic

process. It is clear in the dictum that democracy is of the people, for the people and by thepeople. When citizens are excluded, democracy becomes a farce and is sarcastically referred

to as off the people, fool the people, and buy the people.

Citizens participation goes back to the practice of traditional communities where members all

participated in community decisions. Village councils were active even before the coming of

the foreign invaders.

These community traditions were cruelly suppressed during the colonial period, given lip service

when democracy was introduced and independence granted, then severely marginalized

during the martial law regime.

Now that citizens participation is enthusiastically encouraged, it is sometimes perceived as

part of fashionable global trends. Actually, participation was practiced much, much earlier in

the Philippines.

The general impression is that the field of public finance is the exclusive domain of experts,

particularly economists, finance geniuses and public administrationists. This is only partially

correct. True, calculating income from taxes, preparing budgets and projecting borrowings is

highly technical. However, it should never be forgotten that taxes are extracted from the people,

government services are intended for them, and in the end they pay for government borrowings.Like it or not, public finance decisions create burdens or benefits for different interest groups.

Citizens participation is therefore indispensable to insure that both burdens and benefits are

shared democratically.

Very often policymakers and experts themselves forget that public finance policy or fiscal policy

is inseparable from democratic processes. The very first quotation I was taught as a fiscal

administration student more than fifty years ago is E. Pendleton Herrings classic statement in

his essay, The Politics of Fiscal Policy which was published in the Yale Law Journal in 1937:

The formulation of fiscal policy lies at the dead center of democratic

government. It is the very essence into which is distilled the conflict

between the have-s and the have-nots. It represents the terms of

compromise between powerful economic forces in the community.


12/46


Some questions

Whenever public finance issues are discussed the following basic questions cannot be avoided:

Where does the money of government come from?As a child from the province, I grew up

thinking that government was this all-powerful, all-pervasive, omnipotent force which had us

all citizens in its benevolent grip. I always assumed that government had inexhaustible sources

of money. It constructed school buildings, built roads, and paid the salaries of my schoolteacher

parents. It did not occur to me to ask where the funds of government were coming from.

It was only when I was already studying taxation as a college student that I realized that the

governments money came from the people, especially the tax payers.

A related question is who is bearing the burden of financing government, the salaries of itspeople and the cost of its services?In a democracy, it should be those who are wealthier and

have higher incomes who should pay more for the cost of government. This is according to the

principle of equity which goes all the way back to Adam Smith.

The issue of who is bearing a greater share of the burdens of government has often been

raised. The question has political and ideological ramifications.

Where does the money go to? In other words, who benefit most from the financial resources

of government? Who are the beneficiaries of government services? Who profit from the

operations of government? Theoretically, the services of government are for all citizens. It isoften claimed that those who need government services most, get it least.

Who decides how the money will be spent?The question of allocations is another complex

issue. Who determines the allocation of government expenditures? At first glance, the answer

appears simple. At the national level, the allocations are proposed by the executive, based on

a national plan and declared priorities. The budget proposal is approved by the legislature

after much debate. The same thing happens at the local council which debates and approves

the budget proposed by the local executive.

Nonetheless, these questions are asked repeatedly: when the Executive proposes the budget,

whose interests are being promoted? When the national legislature or the local government

council approved budget proposals, whose interests are they promoting?

Pera ng taumbayan; para sa taumbayan! Loosely translated, this mantra states: the money of

the people is money for the people. This desirable state of affairs can possibly be attained with

active citizens participation and involvement.


13/46


Formulation of fiscal policy

This involves decisions on the mix of policies on taxes and other revenue, allocation of resourcesand budgeting, borrowing and accountability. Fiscal policy is considered a highly technical

area largely beyond the ken of the ordinary citizen. This is true but it has to be formulated

within the framework of publicly agreed goals of development, as provided for in the

Constitution and expressed by the people through means like elections, public consultations,

hearings and the like.

At present, fiscal policy for budget purposes is formulated by NEDA, the Department of Finance

(including the Bureau of Internal Revenue and the Bureau of Customs), the Department of

Budget and Management, and the Bangko Sentral ng Pilipinas. These institutions constitute

the Development Budget Coordinating Committee.

Fiscal policies are based on policies recommended and laws proposed by the above agencies

to the legislature through the President.

The political nature of fiscal policy formulation is emphasized in another classic quote by E.

Pendleton Herring, thus:

The formulation and execution of fiscal policy means the realization of

economic objectives within a political context. This involves the consideration

of what is economically sound in relation to what is politically feasible. In

analyzing the political factors in such a situation three aspects call for

examination: first, the underlying interest groups; second, the current slogans

creeds and symbols used in the defense or promotion of these interests; and

third, the framework of existing governmental institutions through which

social forces and ideas must operate.

(Herring, The Politics of Fiscal Policy, Public Ledger No.1)

PART 2

THE PUBLIC

FINANCE CYCLE


14/46


Taxation and other revenue

It is said that taxes and other revenue form the lifeblood of any

country. Public services and development projects have to be

financed; and the public administration system has to be funded

and maintained. Ideally, the needed resources are raised from the

people themselves.

The decisions which have to be made on which sector should

contribute the most to the resources of government, and which

sector should benefit more from government services are policy

issues and not merely technical questions which can be solved

by formulae.

People participation on taxation and revenue issues are largely

focused on the passage of revenue laws. It is assumed that laws

passed by Congress reflect the preferences of the people since

congressmen and senators are supposed to represent them. This

is not necessarily so since legislators often represent their business,

property and class interests.

Some of the most serious governance issues are related to taxation

and revenue. Citizens groups specializing on these issues have time

and again raised their voices but it is difficult to measure the impact

of their efforts.

1. direct and indirect taxes- Generally, taxes collected by

governments from the people are classified into direct and

indirect taxes. Direct taxes are based on income and property.The best known are income taxes and real property taxes.

These taxes are also called taxes on wealth. These are

considered direct taxes because they are imposed on those


15/46


who have income from their professions, businesses andproperties. Taxes are also imposed on real property, e.g. land.

Direct taxes are considered equitable because the amount of

taxes paid is based on income and wealth. Such taxes are called

progressive taxes. Those who benefit more from the workings

of the economy contribute more taxes.

On the other hand, indirect taxes are based on consumption

expenditures. Taxes imposed during the making and selling of

a product e.g. manufacturing taxes and value-added taxes, areadded to the selling price which is paid for by the final consumer.

Indirect taxes have strong regressive tendencies, especially in

countries like the Philippines where poverty is rampant and

there are huge gaps between the rich and the poor.

Choices made by government on which taxes to impose have

implications on who should bear the burden of taxation. Such

decisions necessitate citizen participation since equity

considerations are at stake.

2. tax and non-tax revenue- Government revenues come from

tax and non tax revenue. As shown above, the kind of tax

imposed can either be equitable or inequitable, just or unjust,

depending on its incidencemeaning who pays them. Non-

tax revenue, on the other hand, is generated from specific

government services, e.g. rentals, sale of government

properties and products, user fees and the like.

3. challenges in revenue administration- For centuries, tax

collection and administration have always been associated

with corruption. The public is increasingly concerned andangry about persistently high levels of corruption in revenue

administration. Tax agencies have long been billed as

flagships of corruption.


16/46


Budgeting and expenditures

This involves decisions on expenditure and budget policy. The budget process covers budget

preparation which is the responsibility of the Executive, budget legislation which is theresponsibility of both houses of Congress, budget implementation which is within the jurisdiction

of the Executive, and budget accountability which is reported by the Commission on Audit.

Ideally, all five steps in the budget process should involve public participation. It can be said

that budgeting is a complex technical process. This is true but these complex and convoluted

decisions take place within a highly charged political environment. Excluding the public would

be a grievous omission. Pendleton Herring has said that the budget process lies at the dead

center of democratic government. It is part and parcel of the democratic process. Therefore,

citizens should be consulted, and must participate in this important undertaking.

The oft-repeated debate is on who should benefit from government expenditures. The

answer to this question can be discerned by examining the process by which public resources

are allocated.

1. Budgeting and ZBB. The present administration claims that the 2011 national budget

is based on zero-based budgeting (ZBB). This is a process whereby proposed budget

allocations are ranked according to responsiveness to declared government

priorities. Proposals which are not responsive to these priorities are not included

in the final budget proposal submitted to Congress.

ZBB is not yet fully implemented in the national budget. Special Purpose Funds

which form a significant part of the total budget are not covered.

2. Alternative Budget Initiative (ABI). Is the government allocating enough resources

for the social development, particularly the Millennium Development Goals. Social

Watch Philippines says no. Since 2006, the Alternative Budget Initiative convened

by Social Watch Philippines has been presenting alternative budgets for education,

agriculture, health, and the environment. It has consistently engaged the

macroeconomic framework for the national budget.

More than a hundred civil society organizations compose. They are grouped into

five technical working groups which focus on different areas: macroeconomic

framework, education, health, agriculture and the environment. These TWGs are

composed of CSOs which focus on specific areas, consult their respective

constituents, and propose alternative budgets based on these consultations.


17/46


Borrowing and debt management

It is a law in economics that resources are never enough for wants.

This is particularly true in the case of developing countries.Borrowing is often resorted to not only to maintain government

but also to attain development goals. In the Philippines, the issue

of borrowing is a contentious issue since the country was one of

those who fell into the debt trap and was debilitated by the global

debt crisis of the eighties.

Ever since the Philippines was sucked into the global debt crisis of

the 80s, Filipinos have always been sensitive to government

borrowing and debt management. The area of debt in public

finance illustrates the huge divide between government policy andpublic expectations as articulated by civil society groups like

Freedom from Debt Coalition.

The policy of government has always been to pay the debt, crisis

or no crisis. At the height of the Philippine debt crisis, demands

for debt moratoria, forgiveness, and even cancellation mounted

in the wake of a worldwide movement for action on debt of

developing countries. Charges were made and questions raised

on the matter of corruption-laden debts like the Bataan Nuclear

Plant, and utilization of borrowed money.

The issue of automatic appropriation of the debt service still

rankles thirty years after the explosion of the debt crisis on a

global scale.

Decisions on borrowingwhy borrow, from whom to borrow,

under what terms to borrow, who benefits from borrowing and

accountability for borrowing are questions too important to be

left to the technocrats only. The public must be consulted since

they will ultimately pay.

If the public were consulted on the matter of debt, it will not be a

surprise if the wishes of citizens are different from the policies of

government.


18/46


Accountability

Accountability is the final phase in the public finance cycle. The

most familiar form of accountability is financial accountability.

This is accountability for financial resources entrusted to publicofficials and agencies. The leading institution for exacting

financial accountability is the Commission on Audit. It is best

known for its financial audits which are the bases of charges filed

against erring officials.

Another form of accountability is program accountability. This

means being accountable for delivering expected outputs,

completing projects and achieving goals. It is one thing to obey all

rules, procedures and processes required by government. It is one

thing to actually deliver services.

This final stage in the public finance cycle distills the essence of

what it is all about, and that is, accountability is to the people who

pay the costs, bear the burdens, and hopefully benefit from

government services.

Citizens participation and public finance

It is obvious that citizens participation is crucial in the entire public

finance cycle. The question is: are they truly participating in a

meaningful manner? An even better question is: are they aware

that they have the duty, the obligation and the right to participate

in public finance. Again,pera ng taumbayan, para sa taumbayan!


19/46


PART 3

THE STATE OF CITIZENSPARTICIPATION

IN PUBLIC FINANCE

The assessment of the state of citizens participation in public

finance was done at several levels:

1. A focused group discussion with citizens groups

participating in public finance, including financial

executives;

2. A focused group discussion with public finance agencies

and legislative staff;

3. Discussions and interviews with local government officials,

indigenous peoples

and other citizens organizations;

4. Dialogues and discussions with experts;

5. Public presentations in two universities and one college;

6. Reflections based on 50 years of studying, teaching,

practicing and advocating public finance.


20/46


Last April 12-13, 2010 two focused group discussions were

conducted with civil society organizations participating in various

aspects of public finance and government organizations

formulating and implementing public finance policies. The author

conducted these discussions with colleague, Asst. Prof. Alvic Padilla,

who formulated the concept and design of the activities as follows:

They FGDs sought to draw the perspectives of critical stakeholders

on citizens participation at the various levels of decision-making

in public finance. The participants were expected to provide

information on the current situation, problems and issues of

participation, as well as the potentials and obstacles in enhancingcitizens participation in the future.

Design:

Two FGDs were organized for two sets of stakeholders. FGD 1 was

composed of representatives from within government, specifically

selected agencies, legislature, COA. FGD 2 was composed of

representatives from outside of government: academe, NGOs,

business, media.

In general, the FGDs provided answers or indications to the basic

question of how much public participation, in what form, and under

what circumstances can public participation enhance public finance

policies and administration. In the process, the discussions

provided leads as to how and under what conditions can public

participation, given the current situation, negatively impact on the

quality of public policy formulation and administration and how

can these be overcome. The FGDs served to:

1. sharpen the program framework on citizens participationin public finance by identifying the factors that promote

and constrain citizens participation; and

2. identify key interventions and strategies that will enhance

citizens participation in public finance.

The Focused Group Discussions


21/46


Focus Group Discussion No. 1. The objective of the first FGD was

to explore and elicit the views and attitude of government

stakeholders on public participation in fiscal policy formulation,

legislation, implementation and evaluation. Generally, the FGD

elicited inputs on what is the value of public participation, how

public participation can help the performance of agencies/offices

in public finance, what is the downside of public participation for

these agencies, what mechanisms are or can be set up to facilitate

effective public participation,

Questions:

1. What is the present attitude of the agency/office on

public participation?

2. What are the types of activities which the agency

deemed necessary to involve some level of public

participation and why?a. Which activities are deemed not feasible or desirable

to have some level of public participation and why?

3. How can public participation be useful to the agency?

When or how is/can it be burdensome?

4. What are the forms of participation? Are there formal

means by which the public participates, ex. ad hoc

bodies, public consultative hearings, etc. What is the

degree of participation (ex. passive or active

participants)?

5. What has been the impact of public participation indecisions and the decision-making processes?

6. What do you think must be changed (ex. attitude,

skills, knowledge, rules, culture) if effective?

a. What institutional and individual capacities can/must

be improved within the agencies?

b. What capacities/skills do they expect from CSOs to

be effective in public involvement?

Target Participants: Representatives from the Department of

Budget and Management, Department of Finance, Bureau ofInternal Revenue, Bureau of the Treasury, Congressional Planning

and Budget Office, Senate Economic Planning Office, Legislative

Budget Research and Monitoring Office, Commission on Audit


22/46


Focus Group Discussion No. 2. The objective of the second FGD

was to elicit the view and attitude of citizens groups on public

participation in various aspects of public finance. In addition to

the basic questions in FGD 1, the following questions/topics were

explored:

1. How do you see your role as CSOs in the area of public

finance?

a) What objectives, principles or agenda does your

CSO seek to pursue?

b) What are your current programs and activities?

ex. campaign? Lobbying? Research? Training?

2. What are the obstacles the group has encountered in

trying to seek public participation in the legislature

and various executive offices? ex. Congress, DBM, DoF,

other national government agencies, LGUs.

3. How would you assess:

a) accessibility of information

b) usefulness of available information ex. Are reports

understandable enough for a layperson to make

informed judgment? Completeness?

c) What, if any are the formal mechanisms by these

agencies for public participation? What are the

strengths and limitations of these mechanisms?

4. What competencies do you think are essential for

CSOs to make credible and effective participants?

a) Do you have ongoing capacity building programs

for these?

Target Participants: CCAGG, Tobacco Control Alliance Philippines

(TCAP), Social Watch Philippines/Alternative Budget Initiative,

Silliman University, Woman Health Philippines, Action for

Economic Reforms


23/46


Highlights of the FGDs

At first glance, it appears from the results of the two FGDs that

government and civil society organizations recognize the need and

importance of citizens participation. However, there is divergence

on each groups interpretation of what citizens participation

entails.

1. Citizens participation. As far as government agencies are

concerned citizens participation is largely information sharing. It

is interpreted as informing the public on what policies are

formulated by the government, how these are implemented and

what citizens are expected to do in order to comply with policies,

procedures, processes, rules and regulations.

The Bureau of Internal Revenue, for example, views citizens

participation as a feedback mechanism from taxpayers to improverevenue collection.

The Commission on Audit representative mentioned participatory

auditing but admitted that the program was successful but was

stopped after funds from UNDP ran out.

On the other hand, civil society organizations associate citizens

participation with empowerment and integrity, and not just

information sharing. The Tobacco Control Alliance Philippines/

FCAP uses the words involvement, democracy andcooperation.

2. Mechanisms for citizens participation. The different

perspectives of civil society organizations and government

institutions are highlighted in their assessment of mechanisms for

citizens participation.

At the time of the FGD the DBM representative admitted that there

were no direct dialogues with the public and or citizens

organizations, although it encourages line agencies and the regionaldevelopment councils to engage CSOs. Mechanisms were largely

limited to public hearings on new taxes. The HOR representative

admitted that budget hearings have limited public participation.

On the other hand, civil society organizations find these

mechanisms ambiguous and limited. The Transparency

International Network admits that this could be because CSOs

themselves are not very active in engaging government. Another

possible reason is the mechanisms provided by government do


24/46


not encourage engagement and participation since these are

largely for information dissemination.

3. Enhancing citizensparticipation. On the question of how

citizens participation can be further enhanced, it is interesting to

note that while government agencies focused on what additional

mechanisms they can put in place, CSOs concentrated on what

they should be doing more.

On the matter of budget transparency for example, the BIR

suggested that DBM publish budget releases to facilitate public

monitoring. The HOR representative suggested that agency reports

should be disaggregated to make it easier for CSOs to validate and

monitor. DBM on the other hand suggested synchronization of

data among involved agencies, as well as automation of the public

financial system to improve the status of expenditure reports. It

also raised questions about accuracy of data.

The HOR representative emphasized the need for public finance

agencies to engage unorganized and marginalized groups who are

underrepresented.

For their part, CSOs admitted the need to improve the capacities

of citizens groups to undertake analysis, validation and monitoring

of public finance data. The need for capacity-building programs in

public finance was repeatedly emphasized. They also recognized

the need for CSOs to coordinate their work. Strong statementswere made about the challenge to continually demand

participation in government initiatives.

4. Other issues. Government agencies noted the need for CSOs

to develop a track record of impartiality and credibility. They called

for equal representation among CSO groups in different services

of government. They also suggested that CSOs familiarize

themselves with the Organization Performance and Indicator

Framework (OPIF) facilitate understanding of budget

implementation.

CSOs like the Transparency and Accountability Network admit that

citizens participation remains limited because very few specialize

on the subject. This is ironic, considering that issues of taxes,

budgets, borrowing and accountability are directly related to each

citizen and are at the heart of democratic process. Social Watch

Philippines highlighted the role of media in encouraging and

reporting on citizens participation.


25/46


Citizens ParticipationIn Fiscal Policy Formulation

It is clear from the earlier discussion on public finance policy or

fiscal policy, that citizens participation is crucial and necessary. It

is therefore important to assess the state of citizens participation

in the formulation of fiscal policy.

The MTPDP, Fiscal Policy, and the National Budget

Governance in the country is guided by the Medium Term

Development Plan of the Philippines. It is a declaration of general

and specific social and economic goals for a period of six years. It

usually coincides with the assumption to office of a newly electedpresident.

The MTPDP is prepared by the National Economic and

Development Authority (NEDA) whose board is headed by the

President of the country. The preparation of the Plan requires the

participation of civil society organizations. Nonetheless, the final

form of the Plan is put together by NEDA.

The Plan includes a chapter on Fiscal Policy. This is because

resources are necessary to fund the objectives and goals of thePlan. Since the Fiscal Plan covers six years, it is understandably

limited to general statements. It is adjusted on a yearly basis by

the Development Budget Coordinating Committee (DBCC) which

determines the macroeconomic targets and the various

components of the national budget.

The members of the Development Budget Coordinating

Committee are: the Department of Budget and Management

which serves as Chair; the Department of Finance, along with its

three main revenue raising bureausthe Bureau of InternalRevenue, the Bureau of Customs, and the Bureau of the Treasury;

the monetary authority which is the Bangko Sentral ng Pilipinas,

and the National Economic and Development Authority.

Who drives fiscal policy? Following the logic of the planning

process, the driver of Fiscal Policy is the MTPDP which contains

not only the national development objectives, targets and goals,

but also prescribes the sources of financing. As the lead agency,

NEDA exerts strong influence over fiscal policy.


26/46


What are the features of the 2004-2010 plan?The MTPDP fiscal

plan for this period is focused on the deficits. The objectives were:

1. to balance the national budget in six years;

2. to reduce the Consolidated Public Sector Deficit viz

the Gross Domestic

Product from 6-7% in 2004 to 1% by 2010; and

3. reduce the ratio of public sector debt from 136% to

90% by 2010.

The non-stop deficits and increases in borrowing accumulated by

the previous administration are now a matter of record. The

budget was not balanced. By 2010, the annual deficit had bloated

to over Ph300 billion.

Who is the driver of the 2011 and 2012 budgets, and overseer of

national development?Immediately after the 2010 elections, the

new administration announced that the last year of the 2004-2010would be reformed to reflect its thrusts and strategies.

However, the new government had to operate immediately; it

could not wait for the 2010 portion of the MTPDP to be

reformulated. Neither could it wait for the 2011-2017 Plan.

Thus, the Department of Budget and Management continued

budget operations in 2010, and submitted its budget proposal for

2011 without waiting for the NEDA. The 2011 was approved by

both Houses of Congress and signed by the President in December2010all without NEDA participation.

Driven by its own internal calendar, DBM has already issued its

2012 budget call and circularized its calendar for the entire budget

processfrom submission to Congress to the hearings, to the final

approval of the President.

In the meantime, the final version of the 2011-2017 Plan is still

being edited for consistency, among others.

Obviously, due to the above circumstances, the obvious and visible

driver of national development for 2011 and 2012 is the

Department of Budget and Management. The situation has led to

observations that cart is driving the horse.


27/46


Why citizens groups are silent on fiscal policy

Of the five phases in the public finance cycle, citizens participation

is least palpable and least visible in the formulation of fiscal policy.

The citizens groups who participated in the FGDs didnt mention

fiscal policy as an area of participation. This is regrettable because

the causes which they are advocating are directly linked with fiscal

policy since inevitably, additional funding is necessary.

There are a number of reasons for this. First, the only way CSOs

can participate in fiscal policy formulation is during the formulation

of the MTPDP of the six-year plan which specifies that they should

be invited to participate. Civil society groups are divided among

the various chapters of the Plan which invariably include

development policy, economic development, social development,

public administration and governance, and fiscal policy. Usually,

CSOs are invited to join the teams on social development but hardlyon fiscal policy. The ones who are invited to provide inputs on the

latter are known experts and not necessarily CSOs who engage

fiscal policy.

The second reason is because very few specialize on the subject,

as stated by Transparency and Accountability Network. The

challenge is therefore to draw in more and more professionals

who are knowledgeable about public finance so they can help

capacitate CSOs and identify important policy areas.

The most effective way by which CSOs can participate in fiscal

policy is during the annual budget preparation process when the

fiscal plan is revised to respond to current realities. However, this

door is firmly closed to CSOs at this time. Under the new

administration, they are invited to give inputs to certain agency

budgets but not to debates on the financing side of the budget.

This effectively shuts out the few CSOs who can engage the

government on fiscal policy with competence and professionalism.


28/46


Citizens Participation In TaxationAnd Revenue Administration

Generally, citizens participation in taxation and revenue administration has been very limited

and sporadic. As pointed out in another part of the paper, citizens participation is largely

interpreted as information-sharing, assistance in the computation of taxes, and campaigns for

taxpayers to report tax cheats and pay their taxes on time.

The debate on direct and indirect taxes

This is probably the most pressing issue which citizens can easily identify themselves with.

Thanks to decades of information campaigns conducted by CSOs, citizens are now aware that

everyonerich or poor pay indirect taxes through the value added tax or VAT.

The first time VAT was imposed as a substitute for sales tax, it triggered protests and complaints.

However, this was during the time of the late President Corazon Aquino when Congress was

not yet in operation, so soon after the ouster of the late President Ferdinand Marcos. Thus

there were not congressional hearings and the law was passed by Executive Order.

When VAT was increased to 12% during the administration of President Gloria Macapagal Arroyo,

there were protests also, but there was no formal mechanism for transmitting the critiques

counter proposals of CSOs. Nonetheless, it was widely believed that the erstwhile popular

senator who campaigned vigorously for the VAT increased was punished with the last weapon

at the disposal of the tax payer: he lost the senatorial election of 2004.

The Constitution and the VAT debate. It has been explained earlier that direct taxes like income

taxes and taxes on wealth and property are considered progressive because they increase when

income, wealth and property increase. On the other hand, indirect taxes like VAT are considered

regressive taxes because everyone pays the same rates regardless of income levels.

The five Constitutions of the Philippines have consistently provided for a progressive system of

taxation. Thus, Article VI, Section 28 (1) unequivocably states that The rule, of taxation shall

be uniform and equitable. The Congress shall evolve a progressive system of taxation.

The above provision means that there should be greater reliance on direct taxes rather than on

indirect taxes. However, Table 1 and Table 1a show the contrary. Direct taxes are programmed

at Ph520 billion or 43.5% of total tax resources while indirect taxes are programmed at Ph675

billion or 56.5% of total tax revenue.


29/46


Particular 2007 % 2008 % 2009b % 2010 %

Actual Program Program

Program Actual

TOTAL 932,937 1,123,587 1,049,182 1,278,893 1.195,715

TAX

REVENUES

Direct 428,027 45.9 502,755 483,518 46.1 569,203 44.5 520,634 43.5

Indirect 504,910 54.1 620,832 565,664 53.9 709,690 55.5 675,081 56.5

Table 1. Summary of Revenues by Source, 2007-2010

Table 1a. Tax Revenue Program, 2007-2010

PARTICULARS

TAX REVENUES

I. DIRECT

INCOME TAXES

Individual

Corporate

Others

OTHERS (Property

Transfer Tax)

II. INDIRECT

GENERAL SALES

TURNOVER OR VAT

SELECTIVE EXCISES

ON GOODS

Alcohol ProductsTobacco Products

Fuels and Oils

Others

SELECTIVE TAXES

ON SERVICES

IMPORT DUTIES

OTHERS

Taxes on use of Goods

or Products

Franchise

Motor Vehicles Tax

Other Taxes (DST,

Mining, etc)Taxes on International

Trade and

International

Transactions

(Travel Tax)

BIR

CHED

NCCA

Forest Charges

Immigration Tax

Fire Code Tax

2007a

ACTUAL

932,937

428,027426,955

137,660

238,958

50,337

1,072

504,910

145,104

54,073

18,79523,209

10,039

2,030

40,345

209,439

55,949

9,063

730

8,333

44,726

1,581

600

785

196

164

42

373

%

45.9%45.8%

14.8%

25.6%

5.4%

0.1%

54.1%

15.6%

5.8%

2.0%2.5%

1.1%

0.2%

4.3%

22.4%

6.0%

1.0%

0.1%

0.9%

4.8%

0.17%

0.06%

0.08%

0.02%

0.02%

0.00%

0.04%

PROGRAM

1,123,587

502,755501,223

159,931

286,339

54,953

1,532

620,832

182,898

57,028

19,63322,260

12,995

2,140

47,599

269,002

64,305

8,875

895

7,980

53,258

1,524

721

659

144

192

46

410

ACTUAL

1,049,182

483,518482,239

144,364

285,260

52,615

1,279

565,664

140,318

60,760

19,83927,555

11,360

1,976

40,115

260,248

64,233

9,277

697

8,580

52,503

1,779

670

887

222

150

46

478

%

46.1%46.0%

13.8%

27.2%

5.0%

0.1%

53.9%

13.4%

5.8%

1.9%2.6%

1.1%

0.2%

3.8%

24.8%

6.1%

0.9%

0.1%

0.8%

5.0%

0.17%

0.06%

0.08%

0.02%

0.01%

0.00%

0.05%

2009b

PROGRAM

1,278,893

569,203567,836

190,013

317,766

60,057

1,367

709,690

218,934

60,020

20,71623,378

13,504

2,422

56,359

300,059

74,318

10,787

1,806

8,981

61,131

1,696

844

700

152

204

49

451

%

44.5%44.4%

14.9%

24.8%

4.7%

0.1%

55.5%

17.1%

4.7%

1.6%1.8%

1.1%

0.2%

4.4%

23.5%

5.8%

0.8%

0.1%

0.7%

4.8%

0.13%

0.07%

0.05%

0.01%

0.02%

0.00%

0.04%

2010

PROGRAM

1,195,715

520,634519,372

156,961

309,639

52,772

1,262

675,081

185,668

60,159

21,28726,511

10,157

2,204

46,312

309,526

73,416

11,456

1,949

9,507

59,579

1,601

778

676

147

155

47

578

%

43.6%43.4%

13.1%

25.9%

4.4%

0.1%

56.5%

15.5%

5.0%

1.8%2.2%

0.8%

0.2%

3.9%

25.9%

6.1%

1.0%

0.2%

0.8%

5.0%

0.13%

0.07%

0.06%

0.01%

0.01%

0.00%

0.05%

2008

a

2009 BESFb

2010 BESF


30/46


Inadequacy of mechanisms to strengthen citizens participation

in taxation and revenue administration.

The observation by both government agencies and CSOs that mechanisms are inadequate are

obvious on the matter of taxes. Citizens are hardly consulted when you taxes are being passed;

they are merely informed.

In the legislature, whenever new tax measures are contemplated, or tax exemptions, deductions

and holidays for the business sector are formulated, the practice is to invite the tax experts,

the tax collection agencies and the business sector. Again, this is due to the assumption that

tax matters are beyond the capacity of the ordinary citizen to comprehend.

Graft and corruption in taxation and revenue administration

The issue of graft and corruption is an ancient public concern which has festered for decades

and even for centuries. Nevertheless, it cannot be said that citizens participation is largely

involved in campaigns against graft and corruption.

There at least two parties to corruption in tax collection: the tax collector and the tax payer.

The tax collection office and the firm of the taxpayer could be the third and fourth parties. This

question has been raised: Why is it that whistleblowing works in other fields of governance

but does not generally work where corruption in tax payment is concerned? The answer: all

parties benefit from the corrupt act; hence, the hesitance to blow the whistle.

Again, the mechanisms set up by the tax collection agenciesBureau of Internal Revenue and

the Bureau of Customs do not encourage CSOs to participate in campaigns or to report instances

of tax cheating.

Unity on sin taxes among CSOs and government institutions

It has been pointed out that there seems to be a disconnect between CSOs interpretation of

citizens participation and that of government institutions.

However, there appears to be unanimity of opinion on the matter of increasing rates of sin

taxes. These are taxes imposed on products which are perceived as harmful to health, as well

as to the sensibilities of some faith groups. These products would include spirits and other

alcoholic drinks, cigarette and other tobacco products, sodas and colas and so on.

Since people cannot be prohibited from consuming these products, increasing taxes is considered

sensible since hopefully, consumption will go down even as taxes increase. The Tobacco Control

Alliance Philippines is lobbying for an increase in sin taxes, specifically on tobacco. They are

monitoring government funds allocated for tobacco control, as well as tobacco companies.

Other groups like health CSOs and faith-based groups have their own reasons for campaigning

against sin products. They can be mobilized by government to generate support for additional

taxes and campaign for public cooperation.


31/46


Citizens Participation In ExpenditurePolicy And Budgeting

Of all the phases in the public finance cycle, expenditure policyand budgeting have the most frequent and sustained citizens

participation, as well as response from the government.

Participatory budgeting is now accepted as essential to democracy

and is adopted in many countries, notably Brazil.

The budget process

There are four stages in the budget process: budget preparation,

budget legislation, budget implementation and budget

accountability. The lead institution for budget preparation is theDepartment of Budget and Management and the various agencies

and instrumentalities of the government who prepare budget

proposals in accordance with budget guidelines issued by DBM.

During the legislation phase, agency proposals are consolidated

into one national expenditure program and are submitted to the

two Houses of Congress. Thus, the House of Representatives and

the Senate oversee the legislation process. After their respective

versions of the budget are reconciled, the President signs it into

law, but not without his or her veto message.

The fiscal agencies of the government lead the budget

implementation phase. Since oversees the release of budget

allocations up to the release of checks, the DBM is perceived to the

lead implementor of the budget. Actually, the three bureaus of the

Department of Finance play an indispensable part since they

generate and collect the resources necessary to fund the budget.

The accountability phase of the budget shall be the responsibility

of the government offices themselves. The Audit Code of the

Philippines (P.D. 1445) explicitly states that fiscal responsibility rests

with the head of the agency.

The Commission on Audit is mandated by the Constitution to audit

and settle accounts of the different agencies and instrumentalities

of government.

Thanks to the budget advocacy of citizens groups, the academe

and the media. There is greater awareness of the magnitudes of


32/46


the 2011 budget. Thus, the debates on the conditional cash

transfers and public/ private sector partnership, intelligence funds

and other are known by the public.

The Ph1.6 trillion budget includes a huge debt service burden,

CCT funding of Ph21 billion, public/private partnership at Ph15

billion, Ph1 billion in travel funds and so on.

At present, citizens participation in the budget preparation phase

is very limited. The formulation of the macroeconomic assumptions

is done by the members of the Development Budget Coordinating

Committee (DBCC) composed of the Department of Budget and

Management; the Department of Finance including the Bureaus ofInternal Revenue, Customs and Treasury; National Economic and

Development Authority and the Bangko Sentral ng Pilipinas.

Socialwatch Philippines critiques the macroeconomic assumptions

regularly in media. Congress also raises related issues but generally

no action is taken.

Departments and agencies hardly consult citizens groups on their

advocacies. One singular exception is the Department of Health.

DBM Secretary Florencio Abad under the Aquino Administration

initiated the practice of involving citizens participation in budget

monitoring during the second half of 2010. With the onset of 2011,

consultations with the different departments were initiated as part

of the budget preparation phase for 2012

Citizens participation is most visible, audible and palpable during

the budget legislation phase

For fifteen years now, Social Watch Philippines has been

monitoring government expenditures for social development.

Since 2006 SWP has been submitting alternative budgets.

The Alternative Budget Initiative is now part of the budget

legislation phase and is included in the hearings of the


33/46


Appropriations Committee. Since then, the number of citizens

groups actively involved in budget legislation has increased, e.g.

Incite-Gov, Budget Advocacy Group, Pera Natin Ito, PhilippinePublic Transparency Reporting Project, and other emerging groups.

In terms of response, legislators sponsor items in the Alternative

Budget Initiative and include these in the amendments.

After a consultation process conducted throughout the country,

former Congressman, and now, Senator TG Guingona filed nine

bills designed to correct deficiencies in the budget process.

HB 5580 Impoundment Control Act; HB 5706 National Budget Fund Classification Act;

HB 5707 Budgeting Guidelines for Re-enacted Budget

HB 5723 An Act Defining Unprogrammed Funds

HB 5724 An Act Mandating that the Bicameral Meeting

on the National Budget be conducted in an Open and

Transparent Manner;

HB 5725 An Act Mandating Transparency in Fund Releases;

HR 912 Open and Transparent Bicam;

HB 5716 National Budget Savings Act;

HB 5256 Peoples Participation in Budget Deliberation Act

Citizens participation in the budget implementation process is

largely focused on monitoring. Groups engaged in this include

Incite-Gov, Social Watch, Transparency and Accountability

Network, Concerned Citizens in Abra for Good Government

(CCAGG), Procurement Watch.

Many problems have been identified by citizens groups regarding

the budget implementation processnon-release of allocations,

transfer of funds, use of savings, etc.

It is largely in budget accountability where citizens groups

advocating for transparency and accountability in governance take

an interest also in public finance, including anti-corruption groups.

Thus, the process ofbudget accountabilitywould probably have

the most number of active citizens groups.


34/46


Citizens Participation In Debt and Debt Management

At present, the Debt Threat remains real. Outstanding debt remains high, as shown below:

Particulars

I. Domestic Debt

NG Direct

Govt Securities

Agencies

Relent

Assured

PNB

DBP

NPC/PNPP

NDC

II. Foreign Debt

Direct

Agencies

Relent

Assured

GFI/GOCCs

PNBDBP

NPC/PNPP

NDC

PAL

NG Foreign Bonds

TOTAL

Forex Rate Used

Jan

2,430,269

2,427,975

2,421,154

6,821

0

2,294

0

2,288

0

6

2,013,171

839,125

770,803

68,322

38

38

08

0

30

0

1,174,006

4,443,440

46.60

Feb

2,403,410

2,401,116

2,394,296

6,820

0

2,294

0

2,288

0

6

1,954,195

830,486

762,610

67,876

37

37

08

0

29

0

1,123,672

4,357,605

46.30

Mar

2,536,667

2,534,373

2,527,554

6,819

0

2,294

0

2,288

0

6

1,921,416

799,917

736,224

63,693

36

36

08

0

28

0

1,121,463

4,458,083

45.30.

Apr

2,548,143

2,545,849

2,539,030

6,819

0

2,294

0

2,288

0

6

1,888,337

784,290

722,517

61,773

36

36

08

0

28

0

1,104,011

4,436,480

44.65

May

2,583,717

2,581,423

2,574,603

6,820

0

2,294

0

2,288

0

6

1,970,468

627,756

762,388

65,368

36

36

08

0

28

0

1,142,676

4,554,185

46.20

Breakdown of totals may not sum up due to rounding

Source: Bureau of Treasury

Table 2. NG Outstanding Debt,As of May 2010

(in Mn PhP)


35/46


The debt service burden remained inordinately high in 2010.

The Department of Budget and Management (DBM) announced that it had already released

Ph800 billion, which is one-half of the 2011 Ph1.645 trillion national budget. This was largely

funded by aggressive borrowing.

From January to February alone, media reported over Ph113 billion in global and retail treasury

bonds. For March, a total of Ph104 billion was sold by the Bureau of the Treasury for 5year and

10 year bonds. This does not include treasury bills issued, as well as loans negotiated with

bilateral countries and multilateral institutions.

The above is the result of an expenditure policy which was implemented without synchronizingit with availability of financial resources. The first two and one-half months (January-March

15) of the year are usually times when government is not overflowing in cash. This is because

cash resources are normally used up by the end of the preceding year. The government does

not usually start the year with cash surpluses. Furthermore, tax collections dont pick up until

March 15 each year.

This explains why infrastructure and other cash-heavy activities are not usually implemented

during the first quarter. The government does not have cash. However, for this year, the

government announced that it was front-loading many infrastructure projects and starting

Public-Private-Partnership Programs (PPPs) even as the government did not have cash. Thisdevelopment pushed the fund-raising agencies into a frenzy of borrowing to front load big,

out-of-season government projects.

Citizens participation and advocacies in debt and debt management started at the height of

the Global Debt Crisis during the 1980s. Leading advocates on the debt issue are Freedom

from Debt Coalition and Social Watch Philippines.

The debt issue remains a live issue and continues to threaten the fiscal as well as economic

stability of the country.


36/46


Citizens Participation In Accountability

It can be safely stated that many citizens groups are actively

engaged in demanding accountability from public officials. They

proliferate at national, regional and local levels.

However, not all are concerned with accountability in public

financetheir advocacies can range from public finance,

managerial accountability, political accountability, social

accountability to moral accountability.

The government institution directly enforcing public financial

accountability is the Commission on Audit.

Since the issue is directly concerned with governance, the

international communitybilaterals, multilaterals and

international civil society is very active in exacting financial

accountability, with or without citizens participation.

With the new administration elected on a platform of reform and

anti-corruption, many citizens groups have emerged, with namesand initials as numerous as the names on the alphabet


37/46


Does Citizens Participation WorkIn LGU Finance?

LGUs and the public finance cycle

The situation in local public finance mirrors what is existing at the national level. In many local

government units, citizens participation is not visible in the finance cycle. This is partly due to

the Local Autonomy Code which does not provide for citizens participation in local finance.

Local fiscal policy planning is considered the turf of the Local Finance Committee which is

composed of the Planning and Development Officer, Budget Officer and Treasurer.

Citizens are not also involved in tax planning, policy, and tax collection. As for expenditures

and budgeting, citizens do not usually participate in the budget preparation.

Budget legislation generates more interest, especially in local government units where the

proceedings of local councils and debates on the budget are covered by television and radio.

Budget implementation elicits the most interest since programs and projects which are

implemented are visible to the citizens. Comments from media and interest groups reach

citizens and influence public opinion, and in certain cases, action.

Budget accountability generally does not generate citizens action, except in places where civilsociety groups are very active. The CCAGG of Abra, for example is a very well known civil

society group which monitored highway projects in their province. As a result of their budget

monitoring, they filed cases against DPWH officials in their area.


38/46


LGUs and the Millennium Development Goals

Local government units are at the forefront of the efforts to attain

the MDGs by 2015. They were mandated by the Department of

Interior and Local Government to consider the MDGs and other

social development goals in their budgets.

Among civil society organizations, Social Watch Philippines has

conducted a consistent and sustained campaign for financing the

MDGs. The campaign is conducted at the national and local levels.

Social Watch Philippines has assisted selected LGUs in Luzon,

Visayas and Mindanao in making their budgets more responsive

to the requirements of MDGs. In all these efforts, civil society

organizations were active partners. SWP capacitated both CSOsand local government officials.

Does citizens participation work in local finance?

Judging by the progress in a two year project conceptualized by

Social Watch Philippines, funded by the European Union, and

implemented by La Liga Policy Institute in partnership with Social

Watch Philippines, the answer to this question is a big YES.

The project entitled Cementing Pathways to Financing the MDGsinvolved six local government units in the provinces of Negros

Oriental and Pangasinan, and non-government organizations and

community-based organizations in the municipalities of Dauin,

Sibulan and La Libertad for Negros Oriental and Alaminos City, and

the municipalities of Bani and Burgos in Pangasinan.


39/46


The project involves the mobilization of the local government units

and civil society organizations in cooperative efforts which will set

them on pathways towards adequate financing for MDGs.

Mentoring and capacity-building were conducted by Social Watch

and La Liga.

The project started on January 2010 and will end in December

2011. The two-year period is in recognition of the fact that

developing citizens participation in public finance is a long process.

The preparatory period included convincing local governments and

civil society organizations to be part of the project.

The collection of baseline data yielded valuable data on the six

municipalities and the participating civil society organizations.

These were useful not only for financial objectives but also inidentifying problems, and setting priorities.

The series of capability training sessions on different aspects

of budgeting to actual budget engagement were very useful

for local government units who were constantly engaged by

civil society groups.

At present, the participants in the two pilot provinces are in the

final stage of actual budget engagement, including development

and investment planning.

This unique experience will be documented, especially the best

practices. The project will culminate in a Festival on Good

Governance.


40/46


Civil society organizations themselves have recognized that one

reason they are not so active in public finance is their unfamiliarity

with the public finance cycle, and with procedures, processes, rules

and regulations.

Social Watch Philippines has been publishing its analyses of thenational budget, as well as its proposed alternative budget. The

experiences of the Alternative Budget Initiative has been

documented and provide useful tips on successful participation in

public finance.

Groups like the Alternative Budget Initiative, Budget Advocacy

Center, InciteGov, Transparency and Accountability Network, Pera

Natin Ito and other like-minded organizations have organized

capacity-building programs and published materials on national

public finance which are very helpful to citizens groups.

The Governance Unit of the United Nations Development Program

headed by Dr. Emmanuel E. Buendia, the Civil Service Commission

and Social Watch Philippines launched last May 6 a Source Book

on Local Public Finance.

The project which is implemented by Social Watch Philippines has

produced a book (now laid out back to back with this paper) which

describes in detail the financial operations of local government

units. This book will certainly be invaluable to citizens groups

seriously interested in participating in local finance..

Tools For Citizens Participation

In Public Finance


41/46


There are 18 million indigenous people in the Philippines. This is nearly 20% of the total

population of the country. Many of them live below the poverty line. Their communities are

among the poorest in the country. The National Commission on Indigenous Peoples is attached

to the Department of Environment and Natural Resources, even as their problems and concerns

are more complex than the issues of ancestral domain.

In relation to the MDGs, the situation of indigenous people is closely identified with poverty

and hunger, and low levels of education and health.

Poverty and hunger.Of the 5 regions with the highest subsistence incidence, 3 have significant

IP and Muslim populations while of the 8 regions with 40% or more poverty incidence, 5 have

significant IP populations.

Education. On the other hand, of the 5 regions with the lowest elementary education net

enrolment, 4 have significant IP populations. There can be as much as 80% drop-out rate of IP

student at the primary level.

Under-5 mortality. Of the 5 regions with the highest under-5 mortality rate, 3 have significant

IP populations.

Maternal health.Of the 5 regions with the lowest % of births delivered in a health facility, 4

have significant IP populations.

Reproductive health. Of 8 regions with fertility rate of more than 3.3, 5 have significant IP

populations.

Malaria and other diseases. The 5 provinces with the highest malaria incidence are IP andMuslim-populated. Of the 9 regions with tuberculosis case detection rates higher than the

national average, 5 regions have significant IP populations.

Sustainable development in country plans. Mining applications continue to pile up in IP lands

Can Indigenous Peoples And Muslims

Participate In Public Finance?


42/46


Empowering IP groups through participation in the budget

process

The above project was initiated by Social Watch and funded by

CORD Aid to enable an IP tribe to participate both in the local

budget process. Participants in the process included 3 tribal datus

in the municipality of Makilala in North Cotabato and other tribal

datus and their followers, together with Yamog, Inc., a local

peoples organization, the Philippine Rural Reconstruction

Movement and Social Watch.

The capacity building exercise which took several months involved

the preparation of a Strategic Plan for the benefit of the IPs and a

proposed budget. In addition to technical aspects of budget

engagement, the participants were tutored lobbying for budget

allocations. Furthermore, emphasis was placed on preservation of

local culture as well as respect for local taboos.

The participants also had the opportunity to go to Manila and

obtain an overview of the national budget campaigns.

The entire experience was not only a profound learning experience

for the participants. . It was also a moving and unforgettable

learning experience for the facilitators and tutors. Because the

mentoring sessions were all held in Cotabato, the facilitators had

the opportunity to learn about the status of indigenous peoples.

The sad thing about this exercise was that it could not be replicated

because the funder could not continue supporting the exercise.


43/46


National ARMM

Population below 32.9% 61.6%

poverty threshold

Population below 14.6% 27.5%food threshold

Prevalence of underweight 26.2% 28.8%

children under-5

Elementary education 73.3% 37.5%

completion rate

Infant mortality rate 24.9% 56.0%

Under-5 mortality rate 33.5% 94%

Historical injustices, discrimination and policy paradigm of

exclusion and assimilation contributed to poverty and inequalityin ARMM and Moro areas.

Citizens groups from the ARMM and the Bangsamoro areas are

active members of Social Watch Philippines and other national

networks and coalitions. As such, they participate actively in the

budget and other finance-related campaigns of SWP, as well as

join capacity-building seminars, briefings and press conferences.

The above experiences have given them the opportunity to

expound on advocacies specific to the Muslim peoples.

At present, SWP is organizing womens groups in Sulu and Tawi-

Tawi. This will expand the areas for increased involvement in

public finance issues related to women and the MDGs.

MDGs and the Bangsamoro

Like the Indigenous Peoples, citizens from the ARMM and

Bangsamoro areas are lagging behind MDG and social

development indicators as shown by the figures below:


44/46


Challenges

It has been mentioned earlier that public finance has accelerated.However, peoples participation in public finance is very uneven.

Government response is also very uneven and differs among

agencies, among branches of government and among legislators.

Peoples participation is least visible in fiscal policy, occasional in

revenue, accelerating in expenditures and budget, sustained but

limited in borrowing and accelerating in accountability

Furthermore, there is a need for more efforts to bring in minorities,

e.g., Muslims and indigenous people to advocacies on citizensparticipation.

Challenges to the government

The government should encourage people participation in all

phases of public finance. It should likewise embed people

participation in all processes in the public finance cycle, as well as

consider proposals and advice from peoples organizations. In other

words, it should go beyond tokenism.


45/46


Challenges to peoples organizations

Peoples organizations should build up capacity to engage in, and

participate in public finance. If possible, follow the cycle frompolicy proposal to approval, implementation to accountability.

Establishing partnerships with major players is also very important.

Peoples organizations should be prepared for long-haul

advocacies. For example, Social Watch started its advocacy

campaign in 1996, accelerated in 2006 and is now in its 14th year.

Challenges to media

The media is a significant natural partner of citizens organizations.They can share information, capacity-building efforts, and campaigns

Challenges to the general citizenry

The general citizenry as taxpayers should take an interest in public

finance issues. Each one should undertake action as individual

citizenswrite legislators and bureaucrats, letters to the editors,

attend fora and hearings and take note of positions and activities

of legislators as a basis for selecting candidates to vote for.


46/46

In earlier times, kingdoms were rent asunder on issues of taxes

and excessive expenditures as in the case of the twelve tribes of

Israel and King Solomon. Rebellions exploded over taxes as in

the case of the Basi Rebellion in the Philippines and Robin Hood

of England. Revolutions were ignited, as in the case of the Boston

Tea Party in the United States and the tearing up ofcedulas by

the Katipuneros.

It is high time citizens take an even more active part in publicfinance through peoples organizations.

Citizens participation is an essential element of democratic

governance. Without it our much vaunted democracy will be

nothing but a farce.

Closing Statement

Documents

Pera Ng Taumbayan